The Climate 'Fiscal Cliff': An evaluation of Fast Start Finance and lessons for the future | Kyoto Protocol | Aids

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After a year of extreme weather, developing countries face a climate ‘fiscal cliff’ at the end of 2012, as Fast Start Finance expires and the Green Climate Fund remains empty. New Oxfam analysis of Fast Start Finance reveals that much of it has been a false start. Governments have not delivered on commitments made in Copenhagen to ensure that the funding was new, additional, and balanced across adaptation and mitigation projects. Developed nations must scale up climate finance from 2013, consider innovative proposals to raise public climate finance, and make pledges to the Green Climate Fund which otherwise will remain an empty shell for the third year in a row.
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    1   OXFAM MEDIA ADVISORY 25 November 2012 The climate „fiscal cliff‟   An evaluation of Fast Start Finance and lessons for the future      After a year of extreme weather, developing countries face a climate ‘fiscal    cliff’ at   the end of 2012, as Fast Start Finance expires and the Green Climate Fund remains empty.    New Oxfam analysis of Fast Start Finance reveals much of it has been a false start. Governments have not delivered on commitments made in Copenhagen to ensure the funding was new, additional and balanced across adaptation and mitigation projects.    Developed nations must scale up climate finance from 2013, consider innovative proposals to raise public climate finance, and make pledges to the Green Climate Fund that otherwise will remain an empty shell for the third year in a row. Introduction In Copenhagen three years ago, leaders from developed countries committed to mobilise $100 billion per year by 2020 to help poor countries reduce their greenhouse gas emissions and adapt to the unavoidable impacts of climate change. As a sign of their intent, they also made a down-payment of $30 billion over the three years 2010  –  2012, called „ Fast Start Finance ‟ .  As governments meet in Doha at the very end of this period, they are facing a climate „fiscal cliff  ‟ . Developed countries have yet to make any concrete financial commitments for the period 2013 to 2020. Oxfam‟s research suggests that  levels of public climate finance are set to fall in 2013 compared to the past three years. At the very moment that finance must be scaled up to meet the $100 billion per year Copenhagen promise, rich countries look set to scale down. In this briefing, Oxfam presents new research which evaluates the finance flows from developed countries towards the initial $30 billion Fast Start Finance commitment. It reveals that many of the contributions so far are more of a „false start‟ than a fast start . It is vital that the lessons of the past three years are learned by negotiators and ministers meeting in Doha, to ensure that long-term finance needs are met. At stake are the lives and livelihoods of poor and vulnerable communities on    2   the front lines of the climate crisis, and the chance of keeping global warming below the 2ºC target set in Copenhagen, let alone the 1.5ºC needed.  A catalogue of extreme weather events during 2012 serves as another reminder of why climate finance is critical. Not far from the conference centre in Doha, 10 million people in Yemen do not have enough to eat  –  their daily struggle to feed their families is made even more difficult by the impacts of severe droughts in the US and Russia which have pushed world prices of wheat to record highs this year. Oxfam‟s Fast Start Finance score -card is a mixed one for developed countries. There is no question that funds have flowed, and in many cases will have been put to good use, but Oxfam estimates only 33 per cent of these funds were really new     –  the rest was made up of money which had already been pledged before the Copenhagen conference, or from plans and budget lines that had already been adopted. Only 24 per cent can be considered additional   to the long-standing promise to provide 0.7 per cent of Gross National Income (GNI) as Official Development Assistance (ODA). This risks the re-direction of funds away from other urgent development priorities, like health and education. Climate change is an additional burden for poor countries, and they require additional funds to tackle it. Unless new sources of revenue can be found development aid budgets  –  already under threat in many rich countries  –  may be further cannibalised to keep climate commitments. Oxfam is also concerned at the continuing gap in adaptation financing, which has received just 21 per cent of Fast Start flows, and the fact that loans rather than grants make up nearly 60 per cent of funds. We are also concerned about the overwhelming preference of developed countries to spend revenues through their own bilateral channels, rather than through multilateral channels, especially those where developing countries can have a greater say over the use of resources. No contributing country has a perfect record, and many should be commended for their performance in at least some respects. Now is not the time for recriminations. Poor people already grappling with climate change impacts around the world do not need a blame game in Doha, they need concrete decisions that will make a difference to their lives in the years ahead. This research assesses some of the shortcomings of the Fast Start Finance period so that lessons can be learnt and life-saving long-term climate finance commitments can be met. 2012: Extreme weather and extreme prices are the new normal Superstorm Sandy smashed through Haiti, Jamaica, the Bahamas and the US East Coast last month creating, for many, the iconic image of climate change‟s destructive power in 2012. Over the last one hundred years, sea levels have risen nearly a foot around the New York area, which amplified the storm surge that wreaked havoc on communities in Staten Island and New Jersey. Oxfam and many others have warned that such events are a harbinger of what is to come in a rapidly warming world. 2012 showed that the future we warned about is already here. As well as devastat ing people‟s lives and livelihoods  directly, 2012 also highlighted how they can be hit by the impact of climate change on the world‟s food prices.  The Northern summer saw severe droughts in the US  –  the worst the country had seen in 60 years  –  and in Russia, helping to drive food prices to reach historic peaks. In August, the World Bank reported that the price of maize and soybeans had reached all-time highs in July. 1   Poor people in the Arab region, where this year‟s UN Climate Change talks will be held, illustrate what vulnerability to high food prices means. Yemen is in the grip of a severe food security crisis and some 10 million people  –  almost half the population  –  do not have enough food to eat, five million people need urgent emergency assistance, and one million children are at risk of malnutrition. High global food prices could further threaten its food security as the country imports 90 per cent of its wheat. 1   1  World Bank (30/08/20 12), „Severe Droughts Drive Food Prices Higher, Threatening the Poor‟, accessed at http://www.worldbank.org/en/news/2012/08/30/severe-droughts-drive-food-prices-higher-threatening-poor       3   This is not the first time that countries in the Middle East have been hit by food price spikes, nor are droughts are not a new phenomenon. However scientists have shown how the droughts that hit Russia and Texas in 2010 and 2011 respectively were made much more likely because of global warming. The Russian drought of 2010, combined with erratic monsoon rains in India and flooding in Australia, helped to cause a massive spike in wheat prices. Exacerbated by market panic and government export bans, prices jumped 80 per cent within a year, and 44 million more people were plunged into poverty. Across North Africa and the Middle East, a region dependent on wheat imports, hunger became a bigger problem. Oxfam‟s September 2012 report, titled Extreme Weather, Extreme Prices , warned that what happened in both 2010 and 2012 were not coincidences, but should instead be considered the “ new normal ” . Oxfam‟s report went beyond previous research that considers the gradual impacts of climate change, such as increasing temperatures and changing rainfall patterns, and modelled the impact of extreme weather scenarios on food prices over the next 20 years. The research warns that by 2030 the world could be even more vulnerable to extreme food price shocks, with dependence on US exports of wheat and maize predicted to rise and climate change increasing the likelihood of extreme droughts in North America. Even under a conservative scenario, another US drought in 2030 similar to this year‟s  could provoke a price spike of maize by as much as 140 per cent over and above the average price of food in 2030  –  which is alr  eady likely to be double today‟s prices 2 . Since the Northern summer, world food prices have remained high and with tighter food stocks, prices are expected to remain high into 2013. Severe droughts in major world grain-producing areas  –  either simultaneous or in consecutive years  –  could plunge the world into major global food crisis. And global warming is stacking the odds in favour of such events. Now more than ever, farmers need support to adapt and increase their resilience to extreme weather. Farmers in the US are moving crop production North. They have had access to drought-resilient crop varieties and investment and insurance mechanisms that have tempered their crop losses. But such resources are badly needed too in poorer drought-hit areas. This week, Oxfam announced a weather index insurance payment for more than 10,000 farmers in Northern Ethiopia who will receive cash to help cover crop losses due to drought. It is one of many Oxfam programs around the world that are helping poor communities adapt to extreme weather, yet more programs like this are needed. Poor communities grappling with extreme weather and impossibly high food prices urgently need support, and they must be front of mind when leaders make their decisions about climate finance in Doha. Fast Start Finance: Problems and solutions ONLY   33%   of Fast Start Finance  appears to be new  money   ONLY   24%   of public finance was additional  to existing aid promises   ONLY   21%   went to support adaptation to climate impacts ONLY   43%   was provided as grants , the rest as loans   ONLY   23%   was channelled through multilateral funds   2  Carty, T., (05/09/2012), Extreme Weather, Extreme Prices: The costs of feeding a warming world  , Oxfam International Briefing Paper, accessed at http://www.oxfam.org/en/grow/policy/extreme-weather-extreme-prices     4   European Union   The EU has delivered almost all of its Fast Start Finance commitment of $10bn (7.2bn euros), allocating around 32 per cent to adaptation initiatives. However, Oxfam‟s analysis suggests that only around 27 per cent was new money (funds that had not already been planned or announced before Copenhagen) and only 17 per cent was additional to the commitment to provide 0.7 per cent of GNI in ODA. EU Fast Start Finance has followed sound aid effectiveness principles. However, because nearly 60 per cent is being delivered bilaterally, developing countries have not had a real say over the use and allocation of funds. Just over 40 per cent went through multilateral funds with just above 10 per cent channelled through UN climate funds such as the Adaptation Fund or the Global Environment Facility. Notably, Spain channelled 100 per cent of its contribution through multilateral funds and was the largest contributor to the  Adaptation Fund, and Ireland delivered 100% of its contribution as grants, nearly all for adaptation and at least a portion that is truly additional to existing development commitments . Japan   Japan‟s pledge of $15bn, of which $13.2bn has been allocated at the time of the research, amounts to almost half the global total of Fast Start Finance. While the importance of Japan‟s contribution cannot be overstated, the figures do need some qualification. Unlike other countries, Japan has counted “leveraged” private finance of $4bn towards its Fast Start total. $11bn, or nearly three quarters of the Fast Start total had been announced before Copenhagen under the Cool Earth Partnership. Excluding private money, $3.8bn can be considered additional to Japan‟s ODA target  though it has to be noted this amount is entirely composed of finance that is categorised as “Other Official Flows” which does not qualify as ODA anyway.   Australia    Australia‟s approx $6 20m in Fast Start Finance represented a fair share of the $30bn global goal and is notable for the portion allocated to adaptation (52 per cent of total), the transparency of reporting, the priority given to Least Developed Countries and Small Island Developing States, and for being fully grants-based. While there has been a substantial increase over earlier levels, of the total pledge, only $366m USD was added after Copenhagen and in our view constitutes new money. While part of a growing aid budget, since  Austr  alia‟s overall ODA is below 0.7 per cent, its commitment to climate finance cannot be regarded as additional to existing aid promises.   US   Interpreting US Fast Start Finance data has proved more challenging than for other countries. While there has been a substantial increase over pre-Copenhagen levels, the amount of US funding that can be considered new may be only $2.9 billion. The inclusion in this amount of contributions, including loans, through export credit agencies highlights the lack of common accounting rules across Fast Start Finance. The US has not accepted the 0.7 per cent ODA target. With overall ODA remaining at a low 0.2 per cent and with no significant increase in ODA since Copenhagen, none of the US Fast Start Finance contribution can be considered additional. Moreover, there are many questions about the counting of ongoing food security and other development programs as climate finance. .   1 Creative Accounting Recycled money Under the Copenhagen Accord, developed countries agreed to provide “n ew and additional”  Fast Start Finance   for climate action in developing countries approaching $30bn by 2012. Varying degrees of transparency and the complexity of national budget processes make some countries‟ claims difficult to assess. In many cases it ha s proven impossible within the scope of the research to determine whether a country‟s Fast Start contribution was accompanied by a ONLY   33%   of Fast Start Finance  appears to be new money  
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